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Endogenous Rigidities and Capital Misallocation: Evidence from Containerships

Author

Listed:
  • Maria Garcia-Osipenk

    (Arizona State University)

  • Nicholas Vreugdenhil

    (Arizona State University)

  • Nahim Bin Zahur

    (Queen's University)

Abstract

We investigate how endogenous rigidities inhibit physical capital reallocation. We focus on the role of contract duration - a classic example of an adjustment rigidity. We argue when agents sign longer contracts in booms when markets are thin, they generate a contracting externality which further amplifies thinness and impedes the adjustment of markets to shocks. We develop a framework with booms and busts where agents search and choose match duration. Applying the framework to the containership leasing market, we find substantial misallocation from endogenous rigidities, particularly in the transition after a crash. We also quantify implications for designing industrial policy.

Suggested Citation

  • Maria Garcia-Osipenk & Nicholas Vreugdenhil & Nahim Bin Zahur, 2025. "Endogenous Rigidities and Capital Misallocation: Evidence from Containerships," Working Paper 1536, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1536
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1536.pdf
    File Function: First version 2025
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    Keywords

    TBA;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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